Economic plans aren't realistic

Monday

Feb 27, 2012 at 12:01 AMFeb 27, 2012 at 10:31 AM

Former Massachusetts Gov. Mitt Romney last week finally gave in to the demands of economic conservatives and unveiled the type of tax-cutting plan that will thrill the people who work at the conservative Economic Club for Growth.

Former Massachusetts Gov. Mitt Romney last week finally gave in to the demands of economic conservatives and unveiled the type of tax-cutting plan that will thrill the people who work at the conservative Economic Club for Growth.

Romney’s new economic model calls for a 20 percent cut in everyone’s income-tax rates, reducing the top rate from 33 percent to 28 percent and dropping the lowest rate to 8 percent. He wants to scrap some deductions for high-income earners.

By doing so, Romney has joined President Barack Obama and Republican presidential contenders Rick Santorum, Newt Gingrich and Ron Paul in outlining what they would do to boost economic growth and trim the $1 trillion per year budget deficit.

It’s nice that everyone has a plan. The only drawback is all these plans appear to collide with economic reality.

While every Republican candidate has proposed deep cuts in federal spending, they also want to extend the 2001 and 2003 tax cuts scheduled to expire at the end of the year. Obama wants to extend the tax cuts for individuals earning less than $200,000 a year.

The nonpartisan Congressional Budget Office has warned that extending most or all of those tax cuts will blow a major hole in the budget during the next decade.

In addition, the Committee for a Responsible Federal Budget, a Washington organization that favors dramatic steps to reduce the national debt, issued a report last week that should be required reading for every voter.

The committee deserves to be taken seriously. Its members and directors include former White House chief of staff Erskine Bowles, former Treasury Secretary Paul O’Neill and former Sen. George V. Voinovich, R-Ohio.

The committee concluded that because Romney, Gingrich and Santorum do not spell out enough spending reductions, their plans would add anywhere from $2.6?trillion to $7 trillion during the next decade to the publicly held debt, which are Treasury bills and bonds held by private and foreign investors.

Paul actually would reduce the deficit, but only because he outlines Draconian cuts — such as getting rid of the Federal Reserve Board — that have no chance of winning congressional approval.

Nor does Obama get a passing grade from the committee, which calculates his proposed budget would add from $1.7 trillion to $4.2 trillion in fresh debt.

Romney backers such as Sen. Rob Portman, R-Ohio, contend that the committee did not take into account the spending cuts Romney outlined Friday in Detroit. But even in that speech, Romney would say only that his plan “will not add to the deficit. Stronger economic growth, spending cuts and base-broadening will offset the reductions.”

Granted, this is the election season and nobody wants to campaign on higher taxes and fewer services. But the report also illustrates the dead ends both political parties have maneuvered themselves into.

Because a small slice of the most ideological voters dominate the primaries for both parties, candidates are obliged to offer plans that will appease the far right or far left. That means Republicans must offer tax cuts no matter what and Democrats cannot under any circumstances push for cuts in Medicare, Medicaid and Social Security.

If there is a better formula to create large deficits, nobody has thought of it. Kind of makes you nostalgic for the smoke-filled rooms of the 1950s.

The problem is we have been sold this brand of soap before — cutting taxes while not reducing spending. In 1981 and 2001, Presidents Ronald Reagan and George W. Bush pushed through tax cuts without deep cuts in spending.

We know the outcome. Yes, the economy improved. But the deficit exploded. Hard to believe that in 1980, the federal budget deficit was only $74 billion, which today would be a rounding error.

This isn’t meant to sound preachy. But the numbers are there. Nobody can claim after the election they didn’t know.